Hostages To Their Own Bullshit

Chasing Unicorns

There's something fundamentally unhinged about the conservative agenda in this country. First off is the obsession with returning the budget to surplus, which is one of those notions that sound great but don't stand up to scrutiny. If a government returns to surplus, it essentially shifts debt to the private sector off the government's own books.

A very simple explanation can be found here.

There are only so many Australian dollars. If the government taxes more than it spends (a surplus), it is taking more dollars out of the private sector than it is putting in. Assuming exports equal imports those dollars can come from only one place – private domestic savings. Everyone’s surplus is somebody else’s deficit. 

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The arithmetic is very simple. Total net financial assets in Australian dollars is the sum of government assets, plus net private domestic assets (individuals and businesses), plus net foreign assets. If the federal government runs a surplus then the money has to come from one of the other two. Given the government has virtually no control over the foreign component, a surplus will usually be accompanied by a reduction in savings in the domestic private sector (households and businesses) as they pay more in tax than the government is spending into the private economy. 

When the federal government runs a surplus, private debt almost always increases. In other words, the banks create the money to fill the hole left by the government surplus. The much heralded surpluses of the Howard/Costello government were precisely matched by non-government deficits. These budget surpluses were partly supported by trade surpluses (foreign sector deficits) but even so, private debt increased dramatically.

So the call to cut the government deficit is in effect a call to increase private sector debt. At a time when private sector debt combined is at a record high, it seems incredibly abstruse for the Coalition Government to be putting so much emphasis on getting back to a surplus. Yet any time a Coalition member talks about the deficit, they don't say anything much more cogent than "Deficits = Bad".

The reason they say this is because they don't have the ability to communicate the may aspects of a deficit and so they decided long ago to treat the electorate with contempt and instead go with slogans. And the slogans seem to get dumber each election, so at some point we were going to have the kind of problem where we have to ask if the Prime Minister has any core competencies.

Worse still, the electorate eats up this simplified, un-intelligent patter and vote with their prejudices intact. It is then, entirely without surprise that this current government has foundered on the rocks of its own devising, as it tries to somehow put into place its self-destructive policies and wondering why the economy is failing to grow. The self-proclaimed proficiency with managing the economy is mere propaganda, a line of bullshit that they themselves believe. Now that they are hostages to their own bullshit, they are in effect doing a marvellous job of vandalising the economy.

Is it any wonder Tony Abbott is considered the least competent head of government in the western world?